Pay off $30K in card debt

Dear Debt Adviser,
What is the best way to get rid of credit card debt? Due to a job income decrease, I have added to my credit card debt over the last two years. I rarely use the cards anymore. I pay the recommended amount to pay off in X amount of years. So I am paying extra, but it seems like it is taking forever, and I just want to pay them off the quickest way. I have six cards with interest rates of zero percent to 19 percent, and the total balances combined are close to $30,000. I have never had this much debt on credit cards, and it is stressing me out. Please offer some advice.

Another concern I have is when I started to use the cards, my credit limits had been decreased. How does that affect your score compared to getting a personal loan? My credit score is still good to excellent. I do not want to move balances around and pay the transfer fees, as that hasn't seemed to work for me in the past. Also, a home equity loan is not an option due to lack of equity in my home in the current market for my area.
-- Eric

Dear Eric,
If only you could go back two years to when your income was reduced and cut spending rather than extending your income using credit. That would be the best advice. I know you can't go back, but for my readers who are facing an income reduction, please cut spending first, and only use credit when absolutely necessary.

In fairness, you racked up some significant credit card debt while adjusting to your new income -- but you have kept your credit score intact and are using very little new credit now. These are all big positives in an otherwise negative situation. A byproduct of your positive credit history is that you are in a much better position to eventually find other or additional work to increase your income. Employers often check a credit report as part of the hiring or promotional process and because yours is in good shape, it may help bring in more money to chop down your debt.

You state you are paying the "recommended" amount each month, but there is no recommended amount. The Credit CARD Act requires credit card issuers to include in monthly statements to customers how long it will take to pay off the balance paying the minimum amount due and also how much faster you can pay down the balance by paying more than the minimum due each month. This should not be viewed as a recommended payment amount, but more as a wake-up call for paying more than the minimum due.

The first thing you need to do to get rid of your debt is stop charging anything. If you continue to charge, you may never get out of debt. Next, I would recommend you start by paying off the 19 percent interest rate card first. Determine the total amount you can afford to pay each month on your cards. Make some sacrifices in your spending now to get that amount as high as possible, and you will be out of debt quicker. Subtract the minimum payments for all your other cards, and then pay everything left after meeting the minimums to the 19 percent interest card balance.

For example, let's say you have a balance of $10,000 on your 19 percent interest rate account. If you have at least $850 a month to pay on all your credit card accounts, you could pay off the high-rate balance on the card in two years, while keeping up minimum payments on the other accounts. Your other balances will not go down much, but the most expensive account will be paid off fairly quickly. Once you have paid off the highest interest rate balance, move on to the next-highest interest rate card until you have paid them all.

As you pay down balances, your credit-available-to-credit-used ratio will improve and your credit score may improve as well. Since your score is still good to excellent, moving balances to a personal loan probably won't help.

Good luck!

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